By Jamie Ashcroft
July 03 2014
A farm-out deal in the coming months and “easy wins” onshore Morocco could help re-ignite enthusiasm for AIM-quoted Fastnet (LON:FAST).
Fastnet shares slumped in May after a hotly anticipated, frontier exploration well offshore Morocco encountered oil and gas shows but not commercial volumes of hydrocarbons.
For some time the naturally high risk offshore venture was the main attraction for investors, but, according to Will Holland, Fastnet’s recently appointed chief financial officer, the potential of the onshore acreage will soon become apparent.
Tendrara, the asset in question, is a very much overlooked part of the Fastnet portfolio, the CFO says.
And crucially, Holland points out that onshore the emphasis is on appraisal and development rather than exploration.
“The appraisal aspect of the company has been widely overlooked.
“We’ve historically been known as an explorer – and we do have very good exploration prospects both offshore Morocco and offshore Ireland.
“But, for me, coming from a finance background, one of the things I would do as a mezzanine lender, was look for companies that had a discovery element to them, that needed to be appraised to unlock value.
“And that is what I think we’ve got here.”
Tendrara is very large, at around 14,500 square kilometres, and it already a hosts a known discovery within the block.
“The [known] field is about 300 bn cubic feet of gas on a P50 basis and we think it could be as big as 900bcf.”
“So, we are looking to appraise and develop that field.”
By drilling a couple of wells on the property, Fastnet intends to fundamentally prove that commercial rates can be achieved from the field. It is to dispel doubts created by technical problems with a well drilled by another operator, prior to Fastnet’s involvement.
Holland says that there will be some “easy wins” for Fastnet in this regard.
“The [previous] well was drilled very badly. If you’re looking for operational excellence, that really didn’t occur.
“Drilling with the right weight mud, completing the wells properly, using the correct perforation charge – none of this was done previously.
“If we can prove we can produce 5mln cubic feet of gas from the asset per day, and we’re very confident that we can, then we will have suddenly opened what could become a 1tcf gas field.
“And that is one field in a block which has got many other prospects.”
An appraisal well is scheduled for the fourth quarter of this year, and depending upon results could be followed by second well shortly thereafter.
Offshore the company remains upbeat on the prospectivity, as it recognises that multiple ‘range finder’ wells needed as the exploration frontier is de-risked.
Indeed, more wells will go down in the coming weeks and months – work recently began on the Galp Energia operated TAO well, which involves fellow exploration junior Tangiers (LON:TPL).
In the meantime, another significant share price catalyst seems to be brewing nearer to home.
Negotiations to bring in a partner into Fastnet’s Celtic Sea project’s, off Ireland’s Cork coast, have been ongoing for some time, and the recent completion of 3D seismic looks to have expedited this process.
Fastnet’s is one in a number of farm-outs currently in the works for prospects in the Celtic Sea and the company has seen significant interest from a number of interested parties, according to Holland.
He says Fastnet is now confident of securing a deal within the next three to six months.
Perhaps investors can read director Carol Law’s recent share purchases – she bought 1mln shares earlier this month for around US$100,000 – as an indicator of the confidence within the group.
Before joining Fastnet, Law was an exploration manager for Anadarko Petroleum, the major international E&P, and she is understood to be the hand steering the farm-in negotiations.
Holland says Law is very skilled in farming down these kinds of assets, as he explains: “She knows what the majors are looking for, and she knows how we need to bring it all together.”
Fastnet Oil & Gas plc (FAST) is an independent oil and gas exploration company focused on identifying early stage exploration and appraisal opportunities in Offshore Ireland and Africa. It is quoted on the AIM market of the London Stock Exchange and the Enterprise Securities Market (ESM) of the Irish Stock Exchange. Fastnet’s…
Fastnet Oil & Gas goes for easy wins in Morocco
